Market Liveblog: Stocks end beastly day down 6.66%

(I’ll be liveblogging today’s market events. Updates will come about every hour until the market closes.)

3:18 p.m. - The markets, mercifully, are now closed. The Dow fell 634.75, or 5.6 percent, to 10.809.85 and the S&P 500 tumbled 79.92, or 6.7 percent, to 1,119.46, its worst slump since 2008. It’s rather eerie, but the more detailed closing percentage on the S&P was 6.66 percent. Every stock in the S&P wound up falling today, including Newmont Mining, which had been boldly bucking the trend earlier. Gold settled at a record $1,713.20 an ounce, up $61.40, or 3.7 percent. Oil fell to an eight-month low of $81.31, down $5.57 a barrel.

3:04 p.m. - Dow: down 632.34 at 10,812.27. S&P 500: down 79.83 at 1,119.55. Oil prices continue to fall, dropping to $80.66 a barrel and raising questions of how long they may stay off their highs. Depending on your views of the global economy and world oil supplies, this is either a huge buying opportunity or an ugly new reality for oil companies.

Barclays Capital estimates that every $10 decline in the price of West Texas Intermediate Crude affects the cash flow of large exploration companies by about 8 percent.

“It’s too early to pound table,” David Pursell, with Houston-based Tudor, Pickering, Holt & Co. told the Chronicle’s Tom Fowler. “If you do buy them you either have to believe things are OK or you have a really long time horizon.”

Investors, he said, can’t figure out exactly how the downgrade will affect things in the long term, so they’re simply selling into the uncertainty. “The market is in a `ready, fire, aim’ mentality,” he said.

2:52 p.m. - Dow: down 600.29 at 10844.32. S&P 500: down 74.72 at 1,124.74. Houston retail developer Ed Wulfe said he believes the downgrade and today’s market fallout will have a minimal effect on local retailers. He tells the Chronicle’s David Kaplan that effect seems to be largely psychological:

People will be more cautious about spending and retailers more cautious about expanding. It’ll slow down a little bit and pick up when the dust settles. We’ve been through a lot worse, what we saw in 2009 and 2010. Houston in particular is still a strong, solid economic environment.

2:40 p.m. - Dow: down 509.58 at 10,935.03. S&P 500: down 64.01 at 1,135.36. Houston-area real estate agents don’t seem too worried about the impact that the downgrade might have on interest rates. Ken Smith, of Ken Smith Properties, tells the Chronicle’s Purva Patel that he views the market turmoil as short-term.

“So far, the debt downgrade has led to lower rates, not higher,” he said. “Higher rates would be welcome so long as they rise steadily and do not spike.”

While the local real estate market isn’t immune to national problems, the strong local economy helps insulate the market, he added.

2:04 p.m. - Dow: down 503.75 at 10,940.86. S&P 500: down 68.90 at 1,130.48. Stocks aren’t the only thing plunging today. Oil prices have continued to decline, hitting an eight-month low. Oil for September deliver tumbled $5.57 a barrel to $81.31 recently in trading on the New York Mercantile Exchange. So the bad news is the downgrade means you’ll have a higher car payment, but the upshot is it will cost less to fill it up.

1:04 p.m. - Dow: down 436.24 at 11,008.37 S&P 500: down 57.83 at1,141.32. In his long-awaited press conference, President Obama called last week’s debt deal a good first step. Now, we need to combine the spending cuts in the deal with tax reform and “modest adjustments” to Medicare.

“Making these reforms doesn’t require radical steps,” he said. “What it does require is common sense and compromise.”

So, it probably won’t happen. The debt ceiling debate showed Congress is largely incapable of common sense or meaningful compromise.

Obama also took a shot at S&P, saying the country will weather today’s market turmoil. “No matter what some rating agency may say, we have always been and will always be a triple-A country.”

It’s a nice sound bite, but the speech offered little new or gave investors any sense of confidence. As he spoke, the market declines deepened.

12:50 p.m. - Dow: down 412.33 at 11,032.28. S&P 500: down 55.67 at 1,143.7 OK, so as of Friday, France has a higher credit rating than the U.S. While there was a chance that France might lose its triple-A rating, too, S&P today instead affirmed its rating on France. But the market for credit-default swaps disagrees. As the Wall Street Journal notes, France’s five-year CDS spread is now almost three times as wide as the spread for insuring U.S. debt.

Bond investors seems to agree, shaking off the downgrade. Treasury yields continue to fall. Yields on the benchmark 10-year Treasury have fallen 18 basis points, to 2.38 percent, and the 2-year note hit a record low earlier.

12:36 p.m. - Dow: down 338.67 at 11,106.94. S&P 500: down 48.06 at 1,151.32. Rick Kaplan, chief investment officer for Houston-based Legacy Asset Management, just called. While he thinks we may see some higher rates in the long term from the downgrade, he’s more worried about the second-quarter outlook for corporate earnings. Slower-than-expected economic growth in July means it’s unlikely companies will match their strong second-quarter numbers, he said, and those concerns are factoring into today’s market declines.

“Earnings are going to have to come down,” he said. “This is part of the earnings revisions here.”

12:18 p.m. - Dow: down 370.89 at 11,073.72. S&P 500: down 48.90 at 1,150.48. If there’s one stock you’d want to own today, it’s Newmont Mining. It’s the best-performing member of the S&P 500 today, up $2.49 at $56.90 recently. It, O”Reilly Automotive, Procter & Gamble and Hershey’s are the only gainers among the S&P at the moment. Why is Newmont rising when everything else is falling? Colorado-based Newmont is the biggest U.S. gold producer, and gold is setting records above $1,700 an ounce.

The three organizations are critical to the U.S. financial market: DTC is the U.S. central depository system which settles U.S. equity and fixed income transactions while FICC and NSCC clear those transactions. In 2010 alone, DTC settled nearly $1.66 quadrillion worth of trades.

DTC holds some $34 trillion worth of assets, including almost all corporate bonds. In fact, whatever securities you think you own, you probably don’t. DTC does. So basically, we’re all double-A+ now.

10:47 a.m. - Dow: down 306.98 at 11,137.63. S&P 500: down 39.44 at 1,159.94. Public companies love a “kitchen sink” event, some external calamity on which they can blame poor performance. We’ve seen this with everything from hurricanes to the mortgage meltdown, and now, we may see it with the debt downgrade. As Footnoted.org points out, companies are already adding the potential impact of the downgrade into earnings releases. Morgan Stanley filed a 10-Q with the Securities and Exchange Commission early today saying “concerns regarding downgrade of the U.S. credit rating and the sovereign debt crisis in Europe could have a material adverse effect on our business, financial condition and liquidity.” Others issuing similar disclaimers include car rental company Dollar Thifty and Harris & Harris Group, a venture capital firm.

9:29 a.m. - Dow: down 296.99 at 11,147.62. S&P 500: down 40.64 at 1,158.74. While S&P’s downgrade has thrown the markets into turmoil, other credit rating agencies are holding firm on their decision earlier last week to affirm a triple-A rating for the U.S. Moody’s earlier today issued a report saying it has no plans to change its rating because it believes the economy will improve and that lawmakers will agreed to additional deficit-cutting measures.

We need at least two actions to satisfy the S&P. First a balanced approach of massive spending cuts and modest revenue increases in deficit reduction. Second, no taking hostage and subversion as was done by the Tea Party in using the debt ceiling to threaten default. Both of these issues were specifically mentioned by S&P.

got off of the word “hostage” already. It is not “hostage taking” when the American political process plays out as it was intended. No one chamber of the house and no one branch is supposed to have ever-reaching breadth and power. I love how as soon as the media started using that metaphor now every liberal and her/his mother is using it, too.

Clay, when did the Tea Party take control of congress? I must have missed it.
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The Tea Party is about fiscal responsibility while the Democrats and RINOs are about business as usual, spending and pork.
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Clay, do you believe that the Tea Party is somehow responsible for getting us in debt to the tune of trillions or are you upset that they’re not fans of tacking on trillions more?

It was hostage because for a very very long time compromise is how our government works. This tea party refusing to compromise, to admit their ideology is too far one direction, caused a lot of this mess. We need revenue increases and spending cuts. Both. The gang of six recommended that. The President wanted that, Boehner initially supported that. The tea party wouldn’t budge. This deficit was not created in two years and it won’t go away in two years. It is like this, either we pay for the entitlements or we get rid of them and since Americans like the entitlements like Medicare, we have to pay for them, which means higher taxes.

Anthing S&P does is suspect in my mind. They add value only to their investors and executives checking accounts. They were a major contributor to our current economic circumstance. The subprime lending debacle wouldn’t have happened if S&P (and Fitch, and Moody’s) had not given AA and AAA ratings to WORTHLESS securities.

Sorry, guys. The Tea Party is NOT about fiscal responsibility and it is exerting substantial control over the current fiscal process in Washington. It is about spending cuts and lower taxes no matter the impact on the fiscal well-being of the nation. It is about a specific anti-tax, anti-government ideology at a time when evidence and precedent suggests those actions actually will have an adverse effect on an already struggling economic recovery and an absolute refusal to participate in meaningful discussion or fiscally responsible compromise for the better good. S&P specifically cited the policies and intransigence of the Tea Party members in the Republican delegation exerting a stranglehold on the process in their downgrade explanation.

There is a lot of blame to go around over the last decade, well before the Tea Party.

And the S&P wants entitlement reform, which we obviously need. They also want a balanced approach. And they wanted $4 trillion in deficit reduction. The $4 trillion dollar plan worked out by the Presient and Boehner did all three. The Tea Party, a minority faction in the House, rejected the plan, and subverted the budgetary process by using the debt ceiling and threat of default (something S&P also referred to as bad).

The downgrade will always be known as the Tea Party downgrade.

In the future, our grandkids in history/government classes in school will be taught about the “Tea Party downgrade,” and that the Tea Party was an obscure political faction that was a fad and no longer exists. The Tea Party hurt America and did their damage, and then faded away as unAmerican losers.

Seriously, your only response is “thanks teabaggers”?
So the handful of fiscal conservatives that didn’t want the US spending any more are to blame for the S&P downgrade which according to S&P is because the US isn’t serious about controlling spending?
Maybe instead of throwning gross sexual perjoritives you should read up on what has actually happened. And then you might discover that the insane and unsustainable (which even Obama admits) spending must be controlled. By the way that is what the voters elected the Tea Party politicians to do.

Jimmy Wright should be banned for violating Chron.com’s user agreement with regards to obscene and vulgar language. He is using a vulgar sexual reference regarding gay males to describe a political affiliation.

Teabaggers? What an absolutely absurd comment. This is due to an acculumation of failed Obama/Democrat policies. Perhaps if Obama and the Democrats had actually started working on the economy and jobs in January 2009 instead of Obamacare, we might not be in this fix today. To attempt to blame it on the Tea Party as the administration did all day yesterday is simply a denial of responsibility, unintelligent, and lacking in leadership – which is a great deal of the problem as it is.

Absolutely, jimmydwight. Congress should have done what so many other Congresses have done: Raise the debt ceiling with a clean bill, no strings attached.

Instead, as Speaker Boehner said in his July 25, 2011, prime time response to President Obama, “President Obama came to Congress in January and requested business as usual — yet another routine increase in the national debt limit — we in the House said ‘not so fast.’”

In light of this grand debacle — this totally unnecessary crisis manufacture by the Teabaggers — public opinion of the Teabaggers and Congress in general has sunk like a rock: Congress’ approval ratings are at an all time low, lower than they have ever been in the roughly 40 years that that metric has been tracked. Much lower than President Obama, who, BTW, is also deserving of criticism for going along with the GOP’s insistence on cutting spending while we have 9+% unemployment!

Jimmy, Jimmy, Jimmy. Did you not read the part that the U.S. credit rating will be down-graded again in November if the U.S. does not take significant steps to cut its long-term debt? Lowering debt, my innocent, is what the tea party has been pushing for.

Thanks Obama?? Really? So I’m assuming the trillions of dollars of debt for the two wars that the previous idiot that was in the White House started have nothing to do with the mounting debt problems we’re in now? Wake up people, your problem isn’t Obama, the Tea Party, Republicans or Democrats – we have a busted, I repeat, BUSTED government where more importance is put on voting on party lines than on what WE THE PEOPLE need. I get sick every time I hear another report and see these smiling jackasses on TV like it’s a joke – yeah, my livelihood, my family, my ability to support that – is a sick joke. WAKE UP PEOPLE, it’s not about whether your a Dem or Repub or whatever the hell you may be. It’s about the AMERICAN way of life – and these people sitting on Crapitol Hill are slapping you in the face, being paid off, and then giving you a 10 minute sound bite, acting mad as hell.

Greg, your adviser gave you good advice. But you’re a private citizen facing high interest debt, not the federal government which faces low interest debt.

In times like this — with over 9% unemployment — the best advice for the federal government is to spend much, much more so as to prime the economic pump. In contrast to your personal situation, creditors — as evidenced through the low interest rates they are offering the government — are practically begging the federal government to let them lend the government more money.

In the long run, the federal government must not only balance its deficit, but go into surplus so as to pay down its debt. But right now, with 9+% unemployment, the jobs deficit is much more important than the budget deficit.

This was totally preventable. If anyone remembers, Obama and Boehner had a 4 trillion dollar bi-partisan plan that included both entitlement reforms and increases in revenue. This was the exact amount that the rating agencies said the US needed to avert a downgrade, but the Tea Party wing of the gop dug in their heels and said no to any compromise. So yes this is a Tea Party downgrade.

Peter wrote, “42, so you’re saying that all third world countries can spend their way into prosperity? Wow!!!”

The U.S. is not a third world country, so your question is irrelevant.

Irish_One wrote, “42 said ‘In times like this — with over 9% unemployment — the best advice for the federal government is to spend much, much more so as to prime the economic pump.’ Because the 24% increase in discretionary spending the last two years has done wonders thus far, correct?”

If a doctor prescribes a medication for a patient, but the dosage proves ineffective in curing the patient, the doctor doesn’t just stop treating the patient. The doctor can increase the dosage or try using another drug.

According to the non-partisan CBO, the stimulus saved or created as much as 3 million jobs. Yet, as economists such as Paul Krugman warned back in Sprin 2009, the stimulus was not nearly large enough to bring us back to full employment. In other words, the dosage was too weak to cure the patient.

Indeed, like the New Deal, the problem with the stimulus was not that the government spent too little, but that the government did not spend nearly enough! Remember: It was the massive, federal deficit spending of WW II that finally brought an end to the Great Depression.

Our economy is in a vicious circle: Consumers have (A) lost jobs, (B) suffered reductions in hours and/or wages, or (C) are afraid of (A) or (B) happening to them. With these fears in mind, consumers are paying off debts and cutting back on spending. They are afraid to spend more. On the other hand, because consumers aren’t buying more goods and services, businesses see no reason to hire additional workers: If you’re a businessperson, why hire more help if you’re not getting more business? The federal government is the consumer of last resort: It should be borrowing more (while interest rates are low) and increasing spending so as to break this vicious cycle. In other words, the doctor should increase the dosage, and/or change the composition of the prescription (i.e., alter the components of stimulus).

Doug,,,,Obama could end either, or both wars (and close GITMO) at the drop of a hat. Yet, he marches on in Little Bush’s footsteps. It appears they are more alike than you and your little puppet friends care to admit. Back to the drawing board with you…..

“If the US Government was a family, they would be making $58,000 a year, they spend $75,000 a year, & are $327,000 in credit card debt. They are currently proposing BIG spending cuts to reduce their spending to $72,000 a year. These are the actual proportions of the federal budget & debt, reduced to a level that we can understand.” – Dave Ramsey

You can cut spending, but it will hurt more than anyone realizes. The company you work for today probably has a city, state or government contract or contracts somewhere. Hope none of you work for these companies because change is a comin. I notice that some are saying they cut expenses and it worked to pay bills. Of course it did, but how much did you pump into the economy? How much did you save? Probably little or nothing substantial unless you cut into all the things that drive the local economy restaurants, movie theaters, small businesses, retail etc. The point is there is a tradeoff. If we continue on this path of cut but no spendy the economy will slow down. Most if not all economist agree on that point. Now, what did the nation gain from this little debt ceiling experiment? Nothing. I blame the congress for this one simply because they did not accomplish anything they wanted. In fact the deal brokered was hastily devised and far worse than the one that had revenue increases. Now the military is on the hook for massive cuts and I guarantee you some of these defense contractors are scared mindless right now. We were downgraded for being just stupid.

Thanks Obama you utter and complete Failure. You and Congress knew you would need $4 Trillion in cuts to keep our rating and your hordes of demanding beggars just wouldn’t allow the stoppage of vote payments to your constituents…that’s all you offer…handouts for a vote.

Woot, this is on the Republican Party and the TeaBaggers specifically. S&P made it clear the refusal to negotiate and the refusal to allow the Bush tax cuts to expire eventaully are the cause of this downgrade.

Donald,
So now we are letting S&P dictate our tax laws? How about the American public does that! TEA stands for TAXED ENOUGH ALREADY! Why don’t the 50% of people who pay NOTHING start paying something!
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I say if you pay no taxes you should get no vote! You need to have skins in the game in order to be allowed to have a voice!

Thanks for not even bringing a (D) budget to the floor in TWO YEARS, even with their supermajority……..

This falls squarely on the shoulders of the Democrat party, their economic negligence, their self-centered electioneering and their intransigence over TAX (“revenues”, right) increases during a recession.

And let’s be honest…………. The US hasn’t really had triple-A status in a long time. The fact that the major rating agencies are in the US and beholden to US interests has delayed the inevitable for too long.

Ryan, the Democrats did bring a budget however the Republicans filibustered it to death. Remember the super majority to speak of was gone the moment Ted Kennedy passed away and Scott Brown was elected from Massachusetts.

its because he was too busy giving away 3.2 trillion in money we don’t have to bail everyone out.

They could of done something with the super majority. However playing politics in front of a camera and blaming other people gets votes. Looks like the S&P, our market and the rest of worlds market was not impress. Trillions will be lost world wide. They are F’ing with people lives in order to keep there jobs.

If I remember correctly, there was plenty of time between Kenndy’s Death and Scott being elected. Heck they rushed the Health care vote through to avoid having Scott get a vote on it, so dont give me that bull…

The budget for 2011 that Obama submitted in Feb 2010 was suppose to have been passed by Oct 2010 as required by law. The Dems sat on it until after the elections then just flat passed the buck until April 11.

Howard Dean reiterated that Democratic line in the sand, and did so immediately after having said “everybody” needed to sacrifice. “There’s some things you can’t put into the pot. If Medicare eligibility goes up to 67, you’re going to see people running against Democrats in primaries.
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Right, “everybody” needs to put something in the pot…except Democratic voters.

Trail Trash, a huge cut to medicare and medicaid is a huge hit to everyone including Democratic voters. Democratic voters have put more into the pot than Republican voters, or atleast the people who should be voting Republican. It seems there are a lot of people who think they are Republican but they are not REPRESENTED by Republican ides of philosophies.

We can’t keep spending and borrowing money from China etc. With a $14.3 trillion dollar debt you would think the streets of Washington would be paved in gold, but they really aren’t in very good shape at all.

Stu, the monster domino that fell before was due to Freddie Mac and Fannie Mae. They were GSEs enabled by both parties; however, it was the Democrats who championed them and even kept defending them when they were swirling at the bottom of the bowl. It’s just another example of out-of-control government spending and government meddling that continues to this day and is supported by mainly liberals. Bush was one of the few would called them a problem and wanted additional oversight and auditing.

Stay calm. Fortunes are made in times like these. This from Bloomberg:

Aug. 8 (Bloomberg) — The European debt crisis is poised to flood U.S. banks with something they don’t want and can’t use: more money.
Cash held by U.S. banks surged 8.4 percent to a record $981 billion during the week ending July 27, the Federal Reserve said in an Aug. 5 report. That’s more than triple the amount firms had in July 2008, before the collapse of Lehman Brothers Holdings Inc. almost froze bank-to-bank lending.

People from all over the world are not running to the safety of our banks for no reason. We have our problems but so does the rest of the world. At the end of the day people still rush their money here for safety. Use this opportunity to buy.

If we actually had a leader instead of someone “leading from the rear” we would see Obama come out and talk to the people after this historic down grade. Or failing that he would address the people and talk about the horrendous loss of 22 memeber of Seal Team 6, but instead we have Obama who is locked behind closed doors all day and tonight he is going to two separate fund raisers where cameras aren’t allowed.

Apparently fund raising is more important the the US’s fiscal health or in remembering those fallen heros…

Talk Radio will be frightening conservatives into buying more gold today–at an all time high price. Those folks (the average small investor who gets their advice from Talk Radio) are going to lose their shirts when the immediate panic of the “crisis” subsides.

Quit trying to blame one party for this mess, There’s plenty of blame by both parties. We need to cut ALL programs 15% and raise taxes 4-5% across the board and cut out the ability of 47% of citizens to dodge paying any tax. All Americans benefit from our tax dollars, all should pay, no matter if they make 10K ot 10 Mil. Everyone sacrifices and everyone benefits in the long run.

2, 2 1/2 percent was expected. Although now that they also downgraded Fannie & Freddie (it’s about time) it could get worse, not to mention the news they are on a downgrading roll on corporations. The downgrading of Morgan Stanley should be interesting. The unintended…or is it intended…consequences of a US downgrade? It’s how low will it go that is the question…

The ONLY remaining economic advisor from Obama’s original council, Geithner” stated categorically last week on Fox Bsiness that there was absolutely “NO CHANCE” that the US credit rating would be dropped. No wonder the dude didn’t know how to file his taxes correctly.

Thanks to reckless spending of both Bush and Obama and the failure of Congress to recognize the path we are taking – parallel to Greece, Spain, Italy etc. We need a balanced budget and maintain it with a Balanced Budget Amendment to the Constitution. This debt ceiling increase must be the last one.

Add to my previous comment, we need to “revise the Tax Code”, not “raise taxes”. The effect can be the same but get away from the rhetoric of “paying their fair share”, “eliminate loop holes”, “tax the oil companies, corporate jet owners and wealthiest Americans”. That only infuriates people.
The debt ceiling has bought time to come up with a real, long-term solution. Where’s a John Kasich when you need one. He and his Congress balanced Clinton’s budget.

Isn’t Kasich governor of Ohio now? Just let the “Hope and Change” take effect folks. Remember, Obama promised during the campaign to cut the deficit in half in his first four years without raising taxes on anyone making less than 250,000 one thin dime didn’t he?

This didn’t happen until the Tea Party Poopers came into the picture! And it’s doesn’t pass the funk test when debt ceiling wasn’t an issue when Bush was spending like a drunken sailor. First the Bush disaster and now we have another conservative mess! There is hope, yet when the real voters can kick the neoconazis back out like in 2008. If only the GOP and the wingbutts can only keep up the chaos. drill baby drill, deeper, deeper, make the GOP hole deeper!

in the less than three years Obama has been in office, the debt has increased from $10.6 trillion to $14.2 trillion, a $3.6 trillion increase in about 27 months. In other words, Obama is increasing the debt by $1.6 trillion per year, three times as fast as Bush….

The actions of Mr. Obama and his congressional allies betray a lack of faith in the promise of capitalism to raise the living standards through economic growth. We’ve tried two straight years of Keynesian stimulus, and this discredited theory has produced no better results than it did under Mr. Obama’s ideological forerunner, Jimmy Carter.

Remember, in the last months of Bush, the market was at 13,930. Right after Obama took office, it fell down into the 7000′s. Then Gheitner and Obama decided to print massive amounts of money and pump them into the banks and finance companies to artificially raise their value up to the 12800 range. Now the chickens are coming home …

The Great American Socialist Experiment has failed. It’s Time for Obama and the Democrats to stop playing games and accept some responsibility. Quit Blaming Bush, the Teaparty, S&P and anyone else. Thier Policies and a Lack of decision making as put us in this position, for them to continue to Politicize and pass the Blame is really disgusting and it’s getting really old. Down with D.C.

There is plenty of blame to go around on this debacle. How about we quit pointing fingers and get something done about the tax code? Isn’t it time for a FLAT TAX RATE, where everyone pays their fair share? I mean EVERYONE!

The Great American Socialist Experiment has failed, It’s time for the President and the Democrats to wake up and take some responsibility. The Passing the Blame Game is old and tired, but it apparantly still works on the countless number of sheeple who continue to look the other way. It was not the Tea Party, George Bush or the S&P That caused this, it was the failures of the democrats to Pass a simple Budget for Two years, this could have all been avoided they knew this day would come, yet they waited and did nothing, until the last minute then have the Audacity to Blame the Tea Party… What??? and again libs fall for this garbage open your eyes… who controls the Senate, and the Presidency, and for Two years the Democrats have had complete control…Wake up… quit passing Blame, you know deep down whose responible for this and come election day i think the Majority of American will know as well…

With Obama we will hear more left wing propaganda nonsense from a guy that knows littl of economics except that he’s stuck in his Keynesian bubble and can’t believe that Keynes’s model is flawed because models cannot be fully realistic. This guy is blinded by his liberal loyalty.

John Meriwether form Salomon Brothers founded a hedge fund called Long-Term Capital Management, LTCM in 1994. He created a fund that would profit from the combination of quantitative models and the traders market judgment and execution capabilities. Four years later the fund lost substantial amounts and the Fed Reserve gave them $3.5B. LTCM’s main strategy was to make convergence trades. These trades involved finding securities that were mispriced relative to one another, taking long positions in the cheap ones and short positions in the rich ones. . LTCM’s partners believed, on the basis of their complex computer models, that the long and short positions were highly correlated and so the net risk was small.

In August of 1998, Russia devalued the rouble and declared a moratorium on 281 billion roubles ($13.5 billion) of its Treasury debt. The result was a massive “flight to quality”, with investors flooding out of any remotely risky market and into the most secure instruments within the already “risk-free” government bond market. Ultimately, this results in a liquidity crisis of enormous proportions, dealing a severe blow to LTCM’s portfolio.

The great minds behind the computer models didn’t predict the Russians and they lost. Same thing is happening with the Keynes models, there are too many factors that are affecting the economy and the data that is used is faulty at best. They are guessing and messing with the data and they are failing.

Oh, the glorious drama. We’ve become a globe of drama queens. Fundamentals are still unsound with the continuing global concentration of liquidity
into ever limited areas. It’s everyone for themselves as we reprove, divided we all fall.

S&P got the mortgage crisis wrong and they have this artificial crisis wrong. The only way the US will default on its debt is if Tea Party Republicans force it to default on its debt. No way does the US need to default on its debt because it does not have the ability to pay its bills. Keep in mind. The US can print money. It has no need to print money to pay its bills but it could. The US, also, has the power to tax if it really was in a bind to pay its bills. This is a crisis manufactured by the right wing to try to force a reduction in government. And just as the right wing brought us the Bush recession, they are now working overtime to bring us a double dip recession in an effort to get rid of Obama and reduce government. Here is a video of a Tea Party rally yesterday cheering the fact that S&P downgraded our credit rating.

Wonder who he will blame. His pointy fanger need should be pointing at him. He’s never grown up. I would hope Harry Truman’s sing on the Oval Office Desk is still around somewhere saying “THE BUCK STOPS HERE.” It needs to be dusted off and placed on th Desktop where Obama uses it for putting his feet.

These problems have been brewing for a long time. For years we had compromise between the two parties; now we have none. The president has had no cooperation from the other side of the aisle to fix our country and this is the result. Everyone likes to point fingers, but I will say we are all responsible. The tea party came along at the wrong time to take advantage of our weakness and have made everything worse. You CANNOT just cut spending immediately. It takes reasonable people and we seem to have few of them in D.C. Picketing and ‘tread on me” signs are stupid and have no value in helping our country. We have survived before and we must survive this “cut off your nose to spite your face” attitude. Yes President Obama is campaigning, as has every sitting president before him such as the Bush family. Why was that acceptable and this is not? Double standards abide.

Of course, we are responsible. The Government is only as good as its people. If the majority are lousy people, a lousy Government you get. The attempt at over simplifying is deliberate here. C’mon, this is a country that encourages one to borrow money as a private citizen to buy anything from household appliances to homes. And this went across the board, albeit with different angles from the two parties. Both parties have shown zero political will to tackle huge issues without raising xenophobic, racial and unpleasant commentary. Whether you like it or not, there are a significant people who want to live off the Government, and a significant number that want to do so. And on both sides, we have people who work hard. So, the solution is, to bring the country to its knees so that one side bends completely? Won’t happen. it is human.
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Compromise. And start talking compromise early, not 24 hours before a deadline. If you take an extreme position, then the other side will take an extreme position. There is no choice there. None whatsoever. We can either put our arms together and resolve this, or we can weaken this great country.

we elect these people to solve problems, not bicker like children about everything. when we reduce complex social issues into simple, black-and-white one-liners, we are taking a shortcut from thinking.

neither party should get everything it wants. they are there to solve problems, not ruin the country while telling their constituents that they “won’t back down.”

None of this is funny. ALL those Washington ( censored by me ) heard what Standard & Poors said to them, friends. Li’l Timmy Geithner just didn’t believe them and helped talk an unqualified President into getting mulish. As for you that try to spin it to blame the “Tea Party” Freshmen, what you are accusing them of, actually, is BEING RIGHT.

Try really hard to get your weak leftist minds around what that makes all leftists…:-})

I am sure the first thing the idiot in chief will do is to start wagging his finger and blaming the tea party (change in tactics from blaming Bush). Why is it so hard for Democrats to understand that spending more than your revenue will lead to bankruptcy? The solution is simple. Quit spending more than you bring in…..quit creating entitlements…..quit financing the illegal aliens…..stop the Obamacare fiasco…..slowing the rate of growth does not equate to a spending cut….just quit the spending frenzy. You can’t fix stupid!

Happy Birthday, Lindsey. Unfortunately, instead of a nice crisp $20 inside your card today, you’ll find… well… not much of anything. You see, as long as your government won’t stop spending more than it brings in, the debt continues to rise. And your share of what’s owed to fix the problem won’t sit still long enough to print it on an invoice. We’re all very sorry, sweetheart, but try to have a great and memorable birthday all the same, okay?

Every economist in the country is saying that reducing spending will not, I repeat WILL NOT, prevent further downgrading. Revenue must also be increased, and that means we need to repeal Bush era tax cuts to e wealthy. if I get to pay 30% on my middle-class income, they can damn sure do the same. I’m tired of picking up the tab for corporate America and the wealthy. How about you? I suppose the only bright spot in this blood bath is the fact that supporters of tea party freshmen might think twice before handing over their monies and loyalties to them again. I’m sure they’re losing a lot more money than I am today. Either that, or they just consider it collateral damage to get Obama out of the White House at any cost. Its a big club, and he’s not in it.

Yes, we do need a rating agency to tell us that only force against Obama and the dems will change their approach and reduce spending. It’s the debt stupid! Long term stuff is ok but will not work now. There is plenty to cut…now.
Yes, here it comes, the “Pay their fair share” comment again. He will present his own recommendations in the next few weeks but wait, thru a committee….a real leader. His past recommendations were voted down without 1 single vote for him. Those unemployeed dont’ want unemployment, they want a job. See, more spending and more Kenyan economic theory with the government spending that DOES NOT increase consumption. This is the United States of America…..bla bla bla….more arrogance. America can fail if we keep spending. Cheerleader speech…no substance as usual. He’s so hopeful because we are willing to shoulder the burden. The veterans do deserve credit and the loss of life is sad. He blames Bush but he continues with the war in Afganistan.

Aaaaand….off he goes not willing to answer any questions…..certainly not willing to take the blame or be a leader.

Democrats did not submit a budget of their own but when Paul Ryan offered one they claimed it was to push old ladies off cliffs.

He probably had a 1:30 tee time. Either that or he had another fundraiser he had to jet to on the other side of the country. Do you ever get the feeling he doesn’t really want to be bothered with all this “hard stuff?” I think we should make his life easier starting in 2013.

See how much confidence the world and the US has in owebama, NONE! The market dropped even further after his lies. HE is the one who won’t compromise. He is the one who wants to raise taxes unfairly. This is his excuse to blame everyone else but the blame is his alone. He is inept and cannot run our country – therefore – he has caused unrest in the financial circles. He needs to step down.

Maybe if Congress doubles taxes on businesses and individuals (and while they’re at vote themselves a 20% “cost of living” pay raise), the White House hires another million more bureaucrats and converts all new regulations into Greek, and the Federal Government continues to spend wildly … maybe just maybe we’ll get this thing under control. Okay, who’s with me !!!

instead of working together to solve the problem i say we just keep on blaming everything on whatever party you don’t belong to and refuse any logical compromise. it’s also convinient to constantly mention your scapegoat (unions, corporations, etc) that has obviously caused all of this and remember that if whatever your scapegoat is dissapeared everything would correct itself. that’s how you fix things.

Incredible speech! It starts one hour late. Obama said we need to extend the pay roll tax cuts! I thought he wanted to raise taxes. Then he said we need to start building more roads, bridges and highways! This clown just doesn’t get the picture as to what the problem is. The feds need to stop spending and to start getting the private sector to hire people again. WE NEED A REAL LEADER NOW!

Obama is in denial. The markets aren’t. Time for him to stop talking about more jobs programs, which haven’t worked to this point and which the country can no longer afford. The market and the American people want to hear that he’ll support real deficit reduction through restructuring of entitlement programs.

Everyone talks like this is a bad thing. I’ve had my brokerage account in cash for over two weeks now. There is going to be fire sale prices on stock in the near future. If your 401k is taking a hit you were not paying attention.

Anyone else notice that Obama, who always says the GOP want to kill SS, cut Medicare and throw sick kids on the street, just put Medicare into play? And he did it on national TV in front of a zillion people. So the plan that Obama finally plans to present will depend on reductions in Medicare to help reduce debt.

Democrats created social security, Medicare/Medicaid etc, all of which are broke and bleeding the country dry. Now they want everyone to bail them out…these entitlements are eating up 66% of the entire federal budget (up from 28% in the 1960s)…one doesn’t have to be Einstein to see the trend.

It’s a shame that Congress would let the economy go down in flames at the expense of U.S. citizens, while Dems and Repubs engage in petty partisan bickering. If the economy tanks, congressmen really won’t be affected; working people like us will have to pay the price and shoulder the burden.

Barack said what???? Did he just say we had to have tax cuts to help the economy stabilize??? I think he just threw every Geroge Soros liberal blogger on the Chronicle under the bus, with his grandmother.

Don’t forget that Obama rejected the Deficit Commission that he convened. He said once that he would prefer to be a good one term president rather than a mediocre two term. He will be one term, but will have to really get busy to rise to mediocre.

As it goes down, I buy the stocks… It will be back up and I’ll make money… Still, I wish the idiots in Washington could realize that they need to be fiscally responsible and quit spending more than they make… Since we are not going to volunteer to give them more of our our hard earned dollars, that means that they need to quit wasting our money on all the inefficient government programs. We are not supposed to be a socialist country, but the leftists in the Democratic Party sure do seem to want to try to make us one.

Stocks aren’t going to go up that much, I would sell them as soon as they are up enough to unload. Socialism is the natural order of things, it’s where society is heading. The problem is the democrat and republican parties are trying to resist what is happening.

Until you are willing to blame all of Congress from your local rep to the President himself, each and every one of you who is blaming Obama or blaming the Tea Party is full of themselves. All of the reps, senators and the President is to blame here. Unwilling to comprimise, unwilling the make the necessary cuts, unwilling to absolutely forget party lines and get what needs to be done for the American people. They are all to blame. The entire system is corrupt, even the Tea Party.

Even my father, a hard retired conversative called me last week and told me the same thing. He is frustrated as I am with all of Congress. This has nothing to do with party lines. These ingrates only care about themselves and their pocketbooks. That aside, people need to remember that despite all of this, this country is still the greatest country on Earth. If we can ever get responsible members of Congress who are willing to work together and do what’s right (instead of doing what they need to be re-elected), we can benefit.

But honestly, I don’t know if that is possible. Everybody is scared and the markets today reflect that. The thing is, when the stock market bottoms out, the same people who we complain about day in and day out will be making even more money at our expense. And the worst thing is that the same people who bicker on the opposite sides of the fence are the ones letting it happen.

Instead of placing blame at one group’s or person’s feet, why don’t we work together?

Wow! I’m totally underwhelmed. Nothing new. No real talk. Just the same old tired mantra of spending more money on union required projects that will cost twice as much as they should. We don’t need more of that kind of stimulus. Instead of the talk of great spending cuts and entitlement weform he went for building more bridges. Remarkable. Where has ne been?

Let’s look at consumption and income which is a Keynesian contribution. Keynes postulated that consumption depends mainly on income and that consumption increases as income increases. Therefore, getting an umemployment check increases income ergo consumption. Yep, get a check..buy stuff and the economy just heals itself.

Wow, looks like the RWNJs on here at actively rooting for the economy to tank. Sickening.

Don’t worry. Sane Americans are seeing the baggers for that they really are. Obama will cruise to another term. Herd 27 billion dollar deficit Perry is going to announce. LMFAO. I guess good hair will have to actually debate this campaign.

Now go back to celebrating continued unemployment, lowering stock values etc.. baggers. What a bunch of idiots.

The tea party DID NOT cause this, it was the unrestrained spending of the Dems & GOP. Bush started it and Obama finished it off with the help of the likes of Reed & Pelosi leading Congress. The tea party is trying to fix the problem. We don’t have a choice but to pay our debts according to the constitution, but that means there will have to be cuts elsewhere. We can no longer afford to be the world’s policemen or sugar daddy. That means we bring the boys home and put them on the border.

Congress needs to get their rears back in town and put that Balance Budget Amendment to a vote now. Do that now and the entitlement reform and spending cuts will be mandated. It will stop the meltdown.

Bring that oil on down! More stock market manipulations today.. Wonder what tomorrow holds?? I watched Obama talk and the numbers went down as he kept yakking and yakking.. He doesn’t understand that America has ZERO confidence in him at all..

Due to GOP intransigence, and their outright refusal to raise taxes on the wealthiest Americans, we run the risk of re-entering recession. Years of easy monetary policy to encourage investment and create stock market wealth has been evaporated. How’s that for legislative responsibility? So if we enter a second recession, which the GOP wanted to increase their electoral chances in 2012, how are we to get out of it? Interest rates are near zero, and with the Hooverites in DC obstructing policy, expect years of slow growth and high unemployment. Thank you GOP

I question whether you even know history as it pertains to Hoover. He spendt 1932 and 1933 trying to get additional money out of the Democrats to start a works progress administration(WPA) and CCC-type program only to be rejected by the Democrats in the House and Senate. Then, as soon as FDR won, they approved the same fund request from him. Your continued use of a page from the liberal playbook speaks first to your originality and second to your reasoning. Is Obama so weak that 17 individuals in the House could cause him to weepingly accept their offer? No. If you compare what he got with what Reid said he originally wanted, the only thing missing is a tax increase. Sorry pal, this is strictly Obama’s fault. He could have passed this thing ahead of time in 2010 when he had the majority. He didn’t. The talk he gave to the nation today he could have given…but wait, he did give it. It was in his inauguration speech. Jobs and the economy were going to be his first targets. Check your calendar. We are now 2 1/2 years into his on the job training and he announced today that he soon would present “his plan.”

wanting balance,
So do you dispute that with monetary policy at full boil, a weakened economy AND given the fiscal realties with an obstructionist House, that fiscal policy is even available should we dip into a recession? Or perhaps you are aware of other recessionary prescriptions to deal with recession that are not normally in the economists toolbox. or maybe you are an apologist for GOP and TP bad behavior. Dealing with the economic uncertainties associated with this downgrade seems more important than arguing the finer points of 1930′s political history? As far as Obama not seeking a debt extension last year, perhaps he didn’t think that the GOP would be crazy enough to jeopardize our economy, the global economy, for their political and ideological interests gain. A sane man will never guess what the insane are apt to do.

Oil moving down with the markets is not what you want babydolly. It’s falling on fears of a worldwide double dip recession. More job losses coupled with another round of quantitative easing and inflation means a lot of pain for consumers.

We are witnessing the destruction of the country under the guise of Hope & Change. Where are the solutions?
We have rulers but no leaders. That tantrum by the President this afternoon just proves once again that he is unfit to be President.

For those condemning the Tea Party over failure to pass tax increases, two simple questions:

“How much must we raise taxes to break even?”
“How much must we raise taxes to break even AND address the accumulated deficit of almost $15 trillion?”

Who of the pro-tax contingency is ready to pay twice as much in income taxes? Three times as much? For those in the 50% demographic who don’t pay ANY income taxes at all, are you ready to come on to the taxpayer rolls and start paying too?

Total Debt is 100% of GDP. The Tea Party is right. We can’t tax our way out of this mess. And no new taxes should be imposed unless there are laws in place to make sure those tax increase are not used on new spending.

Therefore, we need a Balanced Budget Amendment. Harry Reid has tabled two bills which contained BBA language that have passed the House.

We need our government to function. Harry Reid has not passed a federal budget in 800 days. He and every other Democratic Senator even rejected OBAMA’S proposed budget. The government continues to spend $4 trillion a year with NO legal budget to control this spending. We need Harry Reid to stop obstructing.

We need entitlement reform. We need Democrats to stop running ‘push Granny off the cliff commercials’ and join Republicans in the discussion of this reform.

Demagoguing the Tea Party is the Democratic Leadership’s attempt to avoid responsibility for this mess. They should focus that energy on solutions instead.

Forget about what Democrats say. The truth lies in what China and the S&P say: America is living beyond its means and must reign in its spending. Specifically mentioned are the big burdens of its entitlement programs.

When a party is all form and no susbstance such as the democrats, the ONLY thing they can do is to place the blame on where it does not belong. They have no answers, no solutions, they are pathetic empty suits.

contrary to what crowd thinks, it was a very good op today…i was 100 % cash i bought into weekness today, i got excelent deals on the dip, will continue buying tomorrow if holds…thanks Bohener and Obama yur giving us big monies $$$$$$$$, now im 60 % on stocks 40 % cash…..go for it populache, this is an op not only for congressman and the wealthy, the poor can benefit also, go for it guys…

No, that destruction started in 2001, when we allowed terrorists to destroy several landmarks, then was followed by a unbalanced budget, massive deficits, high unemployment, two wars, and TARP. Now, we have allowed the Tea Party terrorists to focus on the debt (which they saw no problem raising seven times in the past 8 years)instead of on jobs, which would do more to eliminate the debt than their idea of cutting hundreds of thousands of jobs.

How ironic that a dowgrade of US Sovereign debt rating by S & P caused a huge market crash today. This is the same S & P that 3 years ago rated the mortgage backed securities as AAA and completely missed the fact that the unlying mortagages were worth only pennies on the dollar. That failure allowed Lehman and all the other dumb, greedy banks to load up on these securities and when they started to fail it was 700 billion dominos falling, one after the other. Well I guess you can call that making up for past failures.

42, those treasury’s are not that safe. Do not believe the propaganda. Vary few are buying them. 75% of the treasury’s are being bought with ” free ” money created by the Federal Reserve bank. China holds a large portion. They could economically sabotage us and dump them at a low price. Taking a loss, but causing inflation and economic Armageddon. Silver and Gold are fairly safe.